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UPS United Parcel Service JAMES CASEY TRANSFORMED A TINY MESSENGER SERVICE INTO THE WORLD'S LARGEST SHIPPER BY GETTING ALL WRAPPED UP IN THE DETAILS OF PACKAGE DELIVERY.
By Paul Lukas Reporting by Maggie Overfelt

(FORTUNE Small Business) – "WHAT CAN YELLOW DO FOR YOU?"

That slogan might now be saturating the advertising landscape if United Parcel Service co-founder James Casey had gotten his way in 1915. The fledgling Seattle-based company, then known as Merchants Parcel Delivery, had expanded its delivery fleet to four cars and five motorcycles--big enough to merit a consistent color scheme. Casey, citing the advice of a local advertising man, advocated yellow. But one of his partners, Charlie Soderstrom, protested that yellow vehicles would be impossible to keep clean and noted that Pullman railroad cars were brown for precisely that reason.

Soderstrom won the argument, and now, nearly nine decades later, brown is synonymous with UPS. But if Casey was wrong about yellow, he was right about virtually everything else for the half-century he ran UPS--during which he turned a neighborhood messenger service into the world's foremost delivery company. "Anybody can deliver a package," he'd say in his typically modest way. However, Casey built not just a company but a culture, one that shines today almost as brightly as if he were still running the place, and one that shows how UPS has been able to thrive as a business. The courtesy-oriented service, the relentless efficiency, and the care and attention lavished on each package all stem from him, even though Casey would hate hearing that. "Remember that the story is to be about us--not about me," he once admonished a writer. "No single individual should be given a disproportionate share of credit for the development of the United Parcel Service you are writing about today." Sorry, Jim.

James Casey was born in Nevada in 1888 and was in most respects a low-key fellow. A lifelong bachelor, he lived in a series of simply furnished hotel rooms. His office was once described as a "stark room," with a mostly bare desk. Tall, lean, and taciturn, he generally shunned reporters and was not given to profanity. But that isn't to say that Casey was dispassionate; it just took the right topic to get him excited. And that topic was packages. He loved everything about them--the care that went into their wrapping, the sense of mystery about their contents, the delight in opening them. A 1947 New Yorker profile found him observing a department store's package-wrapping station and waxing enthusiastic--and then some--on the proceedings: "Deft fingers! Deft fingers wrapping thousands of bundles. Neatly tied! Neatly addressed! Stuffed with soft tissue paper! What a treat! Ah, packages!"

Casey's route to his beloved niche began at the age of 11, when he helped support his family as a delivery boy in Seattle after his father died. By the time he was 19, he had founded the American Messenger Co. with fellow teenager Claude Ryan. Most households didn't yet have telephones or cars in 1907, so people who needed to communicate would use a public phone to call a messenger service, which would then dispatch an employee to relay the communique to the recipient. Small deliveries and errands were also common.

Working from a six-by-17-foot room beneath a tavern run by Ryan's uncle, Casey set out to build a business on professionalism and courtesy. One of several competing Seattle services, American Messenger had six bicycle messengers, each outfitted with a matching cap, who quickly earned a reputation for being unfailingly polite. It acquired the best workers because Casey hired only those his partners knew or who came from good homes. Casey and Ryan slept in the office so that they could offer service 24/7, including holidays. They also didn't mislead customers with unrealistic expectations. "We never answered, 'Right away,' as was the custom of some competitors, if we did not have a boy on hand," explained Casey. The company slogan, printed on cards that they posted near public phones, was "Best service and lowest rates." That simple maxim would guide Casey for the rest of his career.

The rest of the template for UPS evolved over the next years. It established zone rates based on the distance traveled for a delivery. As the increase in the number of home telephones diminished the need for message delivery, the company moved into handling home delivery for local department stores. It acquired automobiles to do the deliveries, and Casey divided the city into sectors and assigned drivers consistent routes so that they got to know their customers. If people weren't home, the deliverymen would make two more attempts before returning the package to the store. When Casey surveyed other companies like his around the country to see how they were doing, he discovered that most were struggling. With the utmost confidence in his methods, Casey saw the national opportunity at hand and told a friend, "The field's wide open. Down the coast we go, then eastward toward New York." In 1919 the company, now named Merchants Parcel Delivery, bought out a delivery firm in Oakland. Because of a similarly labeled operation in San Francisco, another name change was necessary, this time to United Parcel Service. When the company expanded to Los Angeles in 1922 and for the first time began offering common-carrier service--parcel delivery between any two addresses within the city--it had inadvertently set up its next avenue for growth.

Department store delivery would dominate UPS's business over the next several decades, but when postwar America moved to the suburbs and began shopping at malls with large parking lots, the need for UPS's delivery services waned. Casey focused on common-carrier service. In 1954 he told his managers the company's new goal: "All manufacturers and wholesalers and their customers, whether nearby or distant, would be brought closer together in time and convenience if there were available to them one fast, economical system for the delivery of all their small packages regardless of destination." The move--expanding address-to-address shipping beyond urban centers and across state borders--put UPS in direct competition with the U.S. post office and triggered a lengthy series of legal skirmishes with the Interstate Commerce Commission and individual state agencies. Although it's easy to take UPS's nationwide scope for granted, that breadth was hard won and acquired piece by piece, as the company slowly gained the right to take packages across more and more state borders. "We had to convince the ICC that we had been doing what we were promising," says Dan McMackin, a 24-year UPS employee who remembers co-workers passing down the stories to him. "They'd collect all the shipping labels in a sack, send 'em to the ICC to show that we went to Bug Tussle and did it on time." Casey thought it would take ten years to achieve his common-carrier goal: Not until 1975 was UPS finally able to service every address in America.

But James Casey's most enduring legacy, even more so than his business achievements, is the work culture at UPS. "The basic principle which I believe has contributed more than any other to the building of our business as it is today," he said in 1955, "is the ownership of our company by the people employed in it." Casey's belief in being privately held was in part a reflection of his own closely guarded persona. "We have kept confidential facts and figures pretty close to ourselves," he once said, "as most prudent people would do with their own private affairs." But that attitude was definitely shaped by what was perhaps the biggest threat UPS ever faced: Its abortive attempt to go public in 1929. There's little information on it, and Casey never liked discussing the move. "The arrangement did not work out entirely as contemplated" was about as expansive as he got, and UPS managers were able to recover all the stock by 1933. After that he routinely dismissed publicly traded companies as being owned by "absentee stockholders" and run by "hired men."

Casey believed in employee ownership because he felt it led to a more committed workforce. "You treat the business like it's yours because it is," says Jim Kelly, a 37-year UPS vet who retired as CEO in 2002. Once a driver or package handler was promoted to supervisor, he or she became a partner and was permitted to own company stock, which could be sold back to UPS upon retirement.

In the late 1990s company executives had to address how to balance this entrenched attitude with the company's need for the currency of publicly traded stock to make acquisitions. "We agonized about whether we could go public and maintain our corporate culture," said Kelly, who led an IPO in 1999. "If we couldn't reconcile the two, we wouldn't have done it." UPS offered just 10% of its stock to the public.

As owners, managers have an incentive to run a highly efficient operation. That impulse is particularly evident in the company's rapid embrace of technology, from developing the nation's first conveyor-belt package-handling system in 1924 to shipping by air. In 1929, Casey realized that passenger planes usually had extra room in their cargo holds, so he made arrangements with several Western carriers to create United Air Express, which offered air delivery up the West Coast and as far inland as Texas. (The Great Depression forced UPS to abandon the venture in 1931; UPS's air delivery service did not resume until 1952.) "He understood the value of automation and technology early on," says Chris Manella, CEO of Ensenda, a startup company enabling same-day package delivery through technology.

And because Casey defined service as "the sum of many little things done well," no aspect of UPS's way of doing business has gone unanalyzed. Casey commissioned a series of pioneering time-and-motion studies to continually evaluate employee practices in an effort to achieve maximum efficiency. "He always had a passionate interest in looking at a problem, taking it apart, and getting more effect with the same resources," says Doug Nelson, president of the Annie E. Casey Foundation, which Jim Casey established in 1947. That is best represented by the company's guidelines for drivers. The instructions include the way drivers should hold the truck keys on the pinkie finger to avoid unnecessary fumbling, as well as how they should put on their seatbelts with the left hand while simultaneously inserting the key in the ignition with the right (see box, page 26).

As these examples suggest, the flip side of owner-managers is that they're prone to push their workers hard. Casey had all drivers repeatedly timed and rated. The Teamsters, who have represented UPS's hourly workers since 1916, have resorted to a number of strikes over the years because of the rigidity of the working conditions. "It's not all sweetness and light," says Don Cohen, co-author of In Good Company (2001), a book featuring UPS as an organization that thrives because it creates trust and a sense of community. "It's very demanding work, like boot camp or military training. Some workers feel more loyalty to the Teamsters than to UPS." Although none of the strikes have had a long-term negative impact, Casey's philosophies of efficiency and courtesy can conflict and constantly have to be balanced. "Drivers build a relationship with customers a few minutes at a time every day," says Cohen. "You can't push efficiency to the absolute limit, or you lose what keeps customers loyal."

By the time Casey retired as CEO in 1962, UPS's annual revenues approached $141 million. Those figures grew as UPS expanded its common-carrier rights and air service, reaching $548.5 million in revenues and $31.9 million in profits in 1969, the first year UPS publicly reported its financials. Revenues in 2002 were more than $31 billion, and profits passed $3.1 billion. The company branched out to Germany in 1975, beginning a global expansion that now encompasses more than 200 countries. UPS's biggest challenge of late has been from FedEx, which by the early 1980s posed a threat to Big Brown with its invention of next-day delivery. UPS responded slowly at first--promoting its cheaper second-day air services--then quickly, building its own airline and competing head-to-head with FedEx on next-day shipping. The firm has established and maintained a presence in the overnight-delivery arena, in which it initially lagged behind FedEx. Meanwhile, it retains a staggering 75% of the U.S. ground-shipping market, where profits tend to be higher than for air shipping.

Jim Casey served on UPS's board until a month before his death in 1983 at the age of 95. Although in some ways he wouldn't recognize the UPS of today--with its 370,000 employees, global scope, new businesses, and public persona--employees say, "This is still Jim Casey's company," because of the culture he created, which has been passed down from generation to generation. Casey was fond of saying, "I'm just the president. The boys operate the business. I'm just a spoke in the wheel." Sorry, Jim. More like the hub.